The
AGRIBUSINESS
EXAMINER                                                Issue # 64      February 7, 2000

Monitoring Corporate Agribusiness From a Public Interest Perspective
 

A.V. Krebs
Editor\Publisher
 

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IOWA SUES TO BLOCK SMITHFIELD FOODS
ACQUISITION AND SALE  OF  MURPHY FAMILY FARMS

Iowa has joined Missouri in seeking to block the announced sale of Murphy Family Farms, the
nation's second largest pork producer, to Smithfield Foods, the world's largest pork producer
and processor.

Iowa Attorney General Tom Miller filed suit in Humboldt County District Court in Dakota
City on January 24 to block the sale alleging "the acquisition would violate Iowa's Corporate
Farming law, which prohibits any pork or beef processor from owning, controlling, or operating a
feedlot in Iowa."

"Our argument is straightforward," Miller said."Processors may not control hog  production facilities  in Iowa, and Smithfield is a processor.  In fact, Smithfield is the largest pork processor in the world."  The suit said Smithfield reported sales of $3.8 billion last year.

"If Smithfield acquires Murphy Farms, it will retain essential control of pork production at about
300 sites in Iowa where Iowa producers have swine production contracts with Murphy Farms,"
Miller said."Those contracts specify today that Murphy Farms has authority over most important
management decisions, from ownership, source and marketing of the hogs, to the hogs' sex, feed
ration, medication, and transportation."

"We allege that adds up to control -- and  a violation if Smithfield acquires Murphy's assets in
Iowa," Miller said."That is important because Iowa's Corporate Farming law was enacted in order
to  preserve free and private enterprise, prevent monopoly, and protect consumers."

Immediately after Miller filed suit District Judge Ronald Schechtman issued a temporary injunction
barring Smithfield from acquiring Murphy's pork production assets in Iowa. Murphy then sold
its Iowa pork operations for $79.4 million to Randall Stoecker, who had managed Murphy's
Midwest operations, including Iowa.

Miller in turn immediately labeled the sale a "sham transaction" designed to circumvent state law
prohibiting packers from owning livestock. He made the charge after amending his office's lawsuit
seeking to prevent Smithfield from buying Murphy's Iowa hog operations.

Jerry Perkins, the Des Moines Register's Farm Editor reports that Miller's petition states that
Murphy lent Stoecker $79.4 million "without any financial input or wherewithal of his own."
Stoecker isn't required to repay the loan for at least 10 years. When Murphy transferred all its
remaining Iowa assets to Smithfield, Miller's petition says, those assets included Murphy's loan
to Stoecker. That made Smithfield Stoecker's creditor and put the company in control of
Stoecker's finances, it says.

Stoecker told Perkins that he is trying to arrange alternative financing for the $79.4 million purchase.  "It takes time to organize this level of financing," he said.

Miller and the lawyers in his farm division, however, after examining the sale documents,
determined that Smithfield would really control the operation. "We are alleging that transactions
purporting to transfer Murphy's Iowa hog production assets to (Stoecker) are a sham designed for
the sole purpose of creating an appearance of compliance by Smithfield with Iowa's corporate
farming statute," Miller noted.

The Iowa suit follows the action of Missouri's Attorney General Jay Nixon who is legally seeking to  block Smithfield from acquiring Murphy Family Farms.  Nixon's suit, filed in a Missouri state
court, is based on the state's corporate farming ban rather than on antitrust law. Nixon is seeking to
have Smithfield's contracts with Murphy Farms, which has significant productions facilities in
Missouri, considered as "ownership" of hogs, and thus illegal.

On September 2, 1999, Smithfield Foods, of Smithfield, Virginia, announced that it had reached
agreement in principle to acquire Murphy Farms, Inc., which is headquartered in Rose Hill,
North Carolina.  Miller's office revealed that on September 3 it contacted Smithfield, to "expressly
make them aware of the prohibitions" of Iowa's  Corporate Farming law, and asked Smithfield to explain how it planned to address the issue.

Miller's suit asked the court to issue preliminary and permanent injunctions prohibiting Smithfield
Foods from acquiring Murphy Farms or any assets in Iowa that would violate the Iowa Corporate
Farming act.

In acquiring Murphy Family Farms, Smithfield noted that Murphy Farms is the second
largest hog production company in the U.S., with approximately 325,000 sows producing
approximately 5.5 million market hogs annually. The acquisition would roughly double
Smithfield's own hog production capacity.  Smithfield also said the  acquisition would increase
the company's level of domestic vertical integration to 60%  (the company would produce 60% of
the pigs it requires for processing.)  Smithfield said it and its subsidiaries currently raise hogs in
North Carolina, South Carolina, Colorado, Virginia, Utah, Brazil and Mexico.
 

SWISS BAN IBP, FARMLAND INDUSTRIES BEEF
DISCOVER DES AND MELENGESTROL ACETATE

After Swiss health inspectors last July discovered imported U.S. beef was  contaminated with DES,
an illegal hormone, Switzerland has barred further imports Farmland National Beef Packing
Co., a unit of Farmland Industries, and the Bruss Co., a subsidiary of IBP Inc. Farmland,
based in Liberal, Kansas., and Bruss, based in Chicago, are among the biggest U.S. beef
processors.

For IBP, once called the nation's "number one corporate outlaw," the ban adds to a long list of
recent meat recalls.  In February, 1999 IBP, the nation's largest (and most profitable) meat packer
had to "voluntarily" recall 10,000 pounds of wholesale ground beef following  reports that it
contained small particles of glass. In October, 1998 IBP recalled beef because of possible E. coli
contamination and earlier in April recalled a meat shipment after a single package produced at a plant
in Joslin, Illinois contained the virulent strain of the bacteria.

The previous August the nation learned of the recall of 25 million pounds of Hudson Foods
ground beef after 16 people in Colorado fell ill after eating patties tainted with the potentially deadly
bacteria known as E. coli 0157:H7. Then came the news that IBP had bought the Hudson Foods
state-of-the-art Columbus, Nebraska plant. One of Hudson's major suppliers had been IBP. Later,
coincidentally, after South Korea discovered e-coli in a shipment of IBP beef, IBP was banned by
South Korea from shipping meat to that country; the U.S.'s third largest beef  export account.

In discovering the contaminated meat Swiss authorities said DES had been found during routine
testing of two samples of imported beef, which were supposed to be hormone-free. USDA and the
U.S. Food and Drug Administration (FDA) are currently trying to track the source of the
contaminated beef. "If sufficient evidence is found, it is potentially a criminal matter that would be
turned over to the Justice Department," Beth Gaston, a spokeswoman for the USDA's Food Safety
and Inspection Service, told the New York Times Elizabeth Olson.

DES, or diethylstibestrol, was used as a growth stimulant, primarily among cattle and sheep growers  in the United States, until 1979 when the FDA ordered it off the market as a suspected carcinogen.  Studies indicated that cancer and other abnormalities could result in the female children of women  who had consumed DES while pregnant.

Olson also reports that the U.S. exported about 1,129 tons of beef to Switzerland in 1998, the latest
year statistics were available, which is one-third of all Swiss beef imports.

“The finding comes at a time when European consumers are sensitive to tainted foods as a result of
several scares involving Coca-Cola products last year and reports of dioxin-contaminated
chicken in Belgium. Beef, in particular, has drawn increased scrutiny because of the outbreak of
what is known as mad cow disease in British cattle, which is caused by contaminants mixed into
animal feed. There are fears that mad cow disease, or bovine spongiform encephalopathy, could be
linked to a similar brain-wasting disease in humans. After England, Switzerland has the
second-highest incidence of the disease in Europe.”

Recently European Union countries have been debating the U.S. whether to allow importing of
hormone-treated beef. In retaliation the U.S.has imposed sanctions on European goods after the
Europeans erected trade barriers to beef products. Although Switzerland is not in the European
Union, it does ban a number of substances in meat that are legal in the United States, including
melengestrol acetate. Olson reports that melengestrol acetate was also found in the beef samples in
July. According to Swiss officials, 26 samples were tested and five were contaminated with
melengestrol  acetate, in addition to the two tainted with DES.

Dr. Roland Charriere, of the Swiss federal health department in Bern, said the beef containing DES
had been consumed before it could be withdrawn from the market. "It was already eaten by the time
the analysis came back," he said.
 

MONSANTO-AMERICAN FARM BUREAU
OFFER FARMER BLOOD-MONEY SCHOLARSHIPS

In still another disastrous public relations ploy Monsanto has teamed up with the American Farm
Bureau Federation (AFB) in announcing high school senior scholarships paid for by the monies
the company collected from royalties it received from the legal proceedings it initiated against farmers  saving the company's genetically engineered seeds from season to season.

In 1998 Monsanto Corp. opened more than 475 seed piracy cases nationwide, generated from
over 1800 leads. More than 250 of these cases were under active investigation, according to
Monsanto's Kate Marshall. More than 100 cases had already been settled.

At the time more than 45 million acres of U.S. farmland was planted with genetically engineered
seed, including Monsanto's RoundUp Ready soybeans and a natural pesticide Bt. For sometime
now Monsanto has been cracking down on farmers who "illegally" save and replant seeds containing  "patented technology."

As Marshall told the Corporate Crime Reporter's Russell Mokhiber, Monsanto is "vigorously
pursuing growers who pirate any brand or variety" of the St. Louis-based company's genetically
enhanced seed. It had hired five full-time and a number of part-time investigators to follow up on all
seed piracy leads it received. In addition, it is had also hired Pinkerton, a private detective firm, and a  number of outside law firms,. to help investigate and prosecute its cases.

According to Scott Baucum, chief of Monsanto's seed piracy enforcement arm, "Monsanto
invests many years and millions of dollars in biotech research to bring growers new technologies
sooner rather than later. When growers save and replant patented seed, there is less incentive for
companies to invest in future technologies that will ultimately benefit farmers."

The Monsanto-AFB sponsored scholarships will be one-time awards of $1500 to 100 high school
seniors chosen by "an impartial selection committee of agricultural educators." Marsha Purcell,
managing director of the AFB's Foundation for Agriculture, told  the Wisconsin Farm Bureau's
Rural Route that the scholarship program was in its second year.

"We are pleased to partner with Monsanto to give farm kids an opportunity to further their
education in agriculture. These scholarships will help prepare the next generation of farm producers
and leaders."
 

MONSANTO SHEDS NAME
TO EMERGE AS PHARMACIA.
SELLS TABLE SWEETENER OPERATIONS

"We have chosen a name with power and global relevance," Robert Shapiro, chairman of
Monsanto, recently noted in announcing that  his company will in the future be known as
Pharmacia since it recently announced its merger the U.S.-Swiss drugs group Pharmacia &
Upjohn.

In ditching the name Monsanto Shapiro, who will head the new company, believe the new name
and logo "will create a strong new identity for our 60,000 employees and will build value with our
existing customers worldwide."

A long-time champion of genetically engineered food Shapiro was once regarded as a visionary who
would mix nutrition, biotechnology, crop protection and medicine in one commercial venture. In
recent years, however, Monsanto has become the victim of its own hype as consumer backlash
against genetically engineered food spread from Europe to the U.S.

In December, 1999 six farmers --- from the U.S. and France --- named as representatives of farmers
worldwide, under the aegis of the National Family Farm Coalition, in a suit formulated by Cohen
Milstein Hausfeld & Toll on behalf of a consortium of other firms, launched a major anti-trust,
price fixing law suit against the Monsanto Corp. and nine corporate co-conspirators (See Issue
#61)

Also, a recent  shareholder campaign unveiled a plan to target 24 companies, including Monsanto,
demanding a moratorium on the use of genetically engineered food until independent testing had been  completed. The campaign is being coordinated by 275 religious and other groups which claim to  control $100 billion worth of shares in U.S. companies.

Formerly a high-flying pharmaceutical stock and darling of Wall Street investors, Monsanto fell
swiftly from grace when its "life sciences" business, which a little over a year ago was regarded as a
world beater, turned into an albatross as shareholders watched their investments lose a third of their
value.

The newly merged Pharmacia Corporation will use the names Searle, Pharmacia and Upjohn for
its three sales divisions. Only an autonomous agricultural subsidiary will continue to use the
Monsanto name.

Monsanto has also announced that it is selling its sweetener operations, including the
NutraSweet and Equal brands, to Tabletop Acquisition, whose institutional investors include
Pegasus Capital Advisors and MSD Capitalan investment group, for $570 million in cash. In 1985, Monsanto acquired Skokie, Illinois-based G.D. Searle & Co., which created NutraSweet.

Monsanto said its sweetener business was not crucial to its long-term strategy. "They're trying to
showcase and maximize their pharmaceutical business," according to Alex Hittle, an analyst at A.G.
Edwards & Sons, a major corporate underwriter.  "They had used Nutrasweet to get into the
foods arena. It would keep a finger in the foods pot. It turns out that that vision was not the ideal
strategy," he told the New York Times Kevin Max.

The sale will not include Neotame, a new sweetener ingredient currently under review by the FDA
But the closely related segments of sweetener ingredients and biogums are still in the process of
being divested, according to Jeff Bergau, a company spokesman. Monsanto has said Neotame is
7,000 to 8,000 times sweeter than sugar. NutraSweet, by comparison, is about 180 times as sweet
as sugar.

"In looking at Monsanto's portfolio, they took on a lot of debt to build the seed side, they needed
to bring the debt down," Hittle said.

"As we stated last year, the tabletop sweetener business, as well as the sweetener  ingredients and
biogums businesses, are excellent revenue-generating businesses that are not in line with
Monsanto's strategic direction," said Gary Crittenden, Monsanto's chief financial officer.
 

CARGILL MAY SELL 18,000 ACRES
OF SAN FRANCISCO BAY MARSHLAND
SOME QUESTION $300 MILLION ASKING PRICE

Secret talks that could possibly result in Cargill, the nation's largest private corporation, selling
some of its 18,000 acres of marshlands around San Francisco Bay, is receiving mixed reviews from
environmentalists and local Bay Area officials. Reportedly, Cargill in a confidential August 10
proposed agreement, is asking for $300 million from government agencies in exchange for
salt-producing ponds it owns on the southern part of the bay.

Restoration of thousands of acres of tidal marsh which ultimately would be incorporate as part of the
Don Edwards National Wildlife Refuge would help significantly in reviving declining fisheries and
bird populations in the southern part of the bay.

While expansion of San Francisco International Airports runways was an integral part of the initial
negotiations with Cargill, the company wanted to consolidate its salt works on the east side of the
bay and sell all of its holdings on the west side.

The airport would have contributed about $200 million to purchase the salt ponds. Cargill,
however, reportedly balked when it was faced with the fact that it would also have to pay to restore
the ponds, since restoration of salt ponds has proved to be difficult, expensive and time-consuming.
Airport officials, meanwhile, have said they would be interested in participating in some wetland
restoration projects in return for permission to build new runways in the bay.

Faced with the restoration issue Cargill suggested a deal similar to that concluded for the
Headwaters Forest in California's Humboldt County where the state and federal governments
concluded a $480 million deal to preserve 5,600 acres of the Headwaters Forest.  In the
Cargill-S.F Bay purchase the federal and state governments would come up with money to
purchase the land, and restoration would be accomplished later, as funds became available.

There is also skepticism among government authorities concerning the price Cargill wants for its
property. It is roughly five times more than the appraised value for 10,000 acres of north-bay salt
ponds the company sold to the state in 1994.

Recently Cargill and Craig D. Hungerford a Madison, Wisconsin land appraiser and his appraisal
firm, Real Estate Dynamics Inc., was charged in a federal court lawsuit  with defrauding
California state and federal governments by inflating the value of 10,000 acres of abandoned salt
ponds on the northern edge of the state's San Pablo Bay "by establishing an artificial and inflated
price of $10 million by making a series of false claims."

In a complaint unsealed on December 17 by U.S. District Judge Charles R. Breyer in San Francisco,  Cargill through its wholly owned subsidiary, Leslie Salt Co., was able to inflate the price of its  property by relying on an allegedly unlawful appraisal method known as a "public-interest value. '  Officials at Cargill's Wayzata, Minnesota headquarters have vehemently denied the suits general  allegations. (See Issue #61)

Cargill's salt-producing ponds long have been sought by government wildlife agencies and
environmentalists for wetland restoration as San Francisco Bay has lost more than 80% of its marsh
and tidal flats since the Gold Rush.

Ralph Nobles, vice chairman of the San Mateo County Planning Commission and a leader in the
fight to persuade Cargill to sell its salt ponds for wetland restoration, said he has kept close tabs on
the negotiations. "It includes all of Cargill's lands on the west side of the bay from Redwood City
to Alviso and a good part of the east side around Fremont," Nobles told the San Francisco
Chronicle's  Glen Martin, Michael McCabe.

"This is really tremendously exciting.This is of national importance, and it would be the greatest
thing to happen to San Francisco Bay since we started crapping it up."

While environmentalists seem interested in the deal they are also wary of the reported negotiations.

"We're in favor of saving and restoring bay lands, but we want to make sure that whatever the
government buys serves the needs of the bay and the quality of life of the people who live there, and
only secondarily the desires of (Cargill),” William Rukeyser, a spokesman for the Bay Area
chapters of the National Audubon Society, pointed out to the Chronicle reporters.

Cargill spokeswoman Lori Johnson has confirmed  that discussions have been under way with
state and federal officials, but she declined to talk about details. "It is no secret that several
governmental agencies have had a long- standing interest in our salt ponds and in seeing them
converted to other habitats, like tidal marsh," Johnson said.
 

TENNESSEE AG POLICY PROFESSOR
CITES FREEDOM TO FARM , U.S. EXPORT POLICY FAILURES
CALLS PRICE RESPONSIVENESS
FUNDAMENTAL FARM POLICY ISSUE

"The 1999 farm legislation has provided us with a real-time public policy experiment where the
farm economy is the lab. If the hypothesis for acceptance or rejection in this experiment is:  The
Freedom to Farm legislation generates a prosperous agriculture, then all observers but a devoted
few would likely reject the hypothesis."

In revealing testimony before a February 2 Democratic Policy Committee hearing Professor Daryll E.  Ray, director of the Agricultural Policy Analysis Center at the University of Tennessee pointed out  that "whether or not returning crop agriculture to free markets is sustainable turns on the price
responsiveness issue.

"This is very important," he added, "price responsiveness IS the fundamental farm policy issue. It
underlies the performance of all farm program approaches.”

Hall noted that the stated intent of Freedom to Farm legislation, while not expressly written into the
law, by its most ardent backers was that the transition from government support programs to the
so-called "free market" was to be the total elimination of farm programs through gradual reduction in
direct  payments  to farmers over a seven-year span ending all payments in 2002.

"But in reality, "he observed, "we do not appear to be headed to either transition. Government
payments have increased to record levels, not declined. With the price and income experience of the
last two years, elimination of all farm programs, including mechanisms to distribute emergency  farm  payments, seems highly unlikely."

In recounting what we have learned in the past four years the current chairholder of the Blasingame
Chair of Excellence in Agricultural Policy, outlined to the DPC hearing what have been the
consequences of designing farm policy specifically for grain exports:

* Farmers have not responded to low crop prices by significantly reducing cropland acreage.

* At the farm level, the experiment is resulting in a rapid deterioration of financial stability on our
farms.

* Domestic demand for crops has continued its long-term upward trend, but exports have been flat
since the mid-1980s. Neither domestic demand not export demand response to the lower prices has
been close to a sufficient level to have a significant impact on rebalancing inventories.

* Recent experience with farm markets suggests that it is timed to “Get Back to the Basics” of grain
market economies.

* Grain markets are different from other markets. In the case of supply, even though prices decline
farmers use their land to grow something when other sectors would shut down. In agriculture, since
land tends to be used in agriculture no matter what, total crop supply declines very little even when
prices plummet.

* In the case of domestic demand, by far the characteristic that most defines the nature of food (and
feed and other indirect food ingredients demand) is its absolute requirement for life. Because it is a
necessity for life . . price is of little consequence.

* We have been told that the export markets would do two things for grain agriculture. First exports
will be the source of demand growth for major crops. Secondly, exports would serve the price
buffeting function that government and Farmer-Owned-Reserve stock programs used to do. When
prices fell, exports would expand sufficiently so that inventories would rebalance and prices would
rebound. Neither has occurred.

* Not only have crop exports not been the driving force behind crop demand since 1985, but grain
exports have not even increased. Exports of major U.S. crops represent smaller percentages of
world exports and smaller proportions of total U.S. grain and soybean disappearance than before the  U.S. lowered price supports and instituted other measures designed to increase exports, including  recent use of marketing loans that allow market prices to fall below support prices.

* We have learned over the past 15 years that there are special circumstances that surround the export  market that often overpower the influence of price. As difficult as it may be to accept, economic  efficiency considerations often lose out to non economic considerations in the case of food and food  related products.

In summary, Halls called for a getting back to basics. "the 1996 act has confirmed that the price
responsiveness of the total-crop supply and demand is low --- low like agricultural economists knew
it to be prior to the export-induced frenzy of the 1970s and 1980s. Once the low price
responsiveness for aggregate (major) crop agriculture is acknowledged, a much broader set of policy  alternatives become available for consideration."
 

CORPORATE AGRIBUSINESS RESEARCH PROJECT
WEB SITE POSTED ON WORLD WIDE WEB

The Corporate Agribusiness Research Project (CARP) web site is now posted on the World Wide
Web featuring: THE AGBIZ TILLER, THE AGRIBUSINESS EXAMINER and "Between the
Furrows."

THE AGBIZ TILLER, the progeny of the one-time printed newsletter, now becomes an on-line
news feature of the Project. Its initial essay concerns one Hillary Rodham Clinton, the newly
declared candidate for a U.S. Senate seat in New York State.

In "HILLARY RODHAM CLINTON'S $99,537 MIRACLE: IT'S THE PITS!!!" now available
through THE AGBIZ TILLER you'll learn some of the messy details behind her cattle futures
"miracle." You will also find in this section the archives for past editions of the THE AGBIZ
TILLER.

By popular reader demand THE AGRIBUSINESS EXAMINER section includes not only an
issue-by-issue and verbose index of this weekly e-mail newsletter, but an archive of all the past
issues.

In "Between the Furrows" there is a wide range of pages designed to inform and educate readers on
the inner workings of corporate agribusiness. In addition to CARP's "Mission Statement,"
"Overview" and the Project director's "Publication Background," the viewer will find a helpful "Fact  Sheet" on agriculture and corporate agribusiness; a "Fact Miners" page which is an effort to assist the  reader in the necessary art of researching corporations; a "Links" page which allow the
reader to survey various useful public interest, government and corporate web sites; a  Feedback"
page for reader input, and a page where readers can order directly the editor's The Corporate
Reapers: The Book of Agribusiness.

The CARP web site was designed and produced by ElectricArrow of Seattle, Washington.
http://www.electricarrow.com

Simply by clicking on either of the addresses below all the aforementioned features and information
are yours to enjoy, study, absorb and sow.

http://www.ea1.com/CARP/
http://www.ea1.com/tiller/ --------------4672B07A50C3196FF0578696--